UK housing: Rents rise as supply of private rental property drops in January

The supply of private rental properties is dropping and reached its lowest point in a year, according to lettings agents. The Association of Residential Letting Agents (Arla) said there was an average of 172 properties per branch in January, 10 fewer than in December 2015. And three in 10 letting agents reported higher rents, a four-month high.

Landlords are the target of a number of tax increases by Chancellor George Osborne, who wants to increase home ownership. He will use the revenue from landlord taxes to fund policies to help first-time buyers, such as shared ownership and discounted "starter homes".

He scrapped a relief allowing buy-to-let investors to offset their mortgage interest payments against their tax bills. And from April, the chancellor will add an extra 3% to standard stamp duty rates for purchases of additional properties. Landlords argue this will mean fewer rental properties so higher rents.

"Supply of housing continues to be a problem and tenants bear the brunt of this with more people competing for properties at higher prices," said David Cox, managing director of Arla. "The majority of tenants find that it is impossible to save very much at the end of the month to put towards buying their own home.

"Our recent Cost of Renting report found that a fifth of those renting in the UK do not expect to ever be able to afford to buy a home, and unless we act soon to build more properties, this number will only get higher."

Landlords raked in their best returns in more than a year in January as rents and house prices rose rapidly. The average annual return for landlords in the month was 12% of their buy-to-let investment, or £21,988, reported the monthly buy-to-let index by the Your Move and Reeds Rains estate agents. That includes both income from rents and the capital gain made on the property price. It was the best total annual returns since November 2014.